The New York Times: Michael C. Woodford: U.S. Makes Arrest in Olympus Scandal

December 20th, 2012

U.S. Makes Arrest in Olympus Scandal

Published: December 20, 2012


Federal agents arrested a former bank executive in Los Angeles on Thursday in connection with the accounting scandal that erupted last year at Olympus, the Japanese camera and medical equipment maker.

Prosecutors in New York said that the executive, Chan Ming Fon,received more than $10 million from Olympus for assisting in its accounting fraud.

The Federal Bureau of Investigation said Mr. Chan, 50, was a citizen of Taiwan living in Singapore. He was charged with conspiracy to commit wire fraud, with a maximum potential penalty of 20 years in prison. His lawyer was not disclosed.

“As alleged, Chan Ming Fon was handsomely paid to play an international shell game with hundreds of millions of dollars of assets in order to allow Olympus to keep a massive accounting fraud going for years,” said Preet Bharara, the United States attorney in Manhattan, in a news release.

The authorities did not identify the financial institutions with which Mr. Chan was affiliated.

In February, the Japanese authorities arrested seven people in connection with the accounting missteps at Olympus, including Tsuyoshi Kikukawa, the company’s former chairman. Mr. Chan was not among those seven.

The company has admitted that executives set up a scheme to cover up $1.7 billion in losses. The illicit maneuvers came to light after Olympus fired Michael C. Woodford, its British chief executive, in October 2011. Soon after, Mr. Woodford made allegations of accounting misdeeds at Olympus.

The Olympus scandal rocked the Japanese corporate sector. The case is being watched closely to gauge how serious the Japanese authorities will be in their pursuit of white-collar crime. The men arrested in February could each serve up to 10 years if found guilty.

The allegations against Mr. Chan could shed more light on Olympus’s elaborate accounting ruses. The company hid losses sustained in the 1990s, later masking them with inflated acquisitions and payments through shadowy overseas funds.

Mr. Chan was a principal at a fund that received large payments from Olympus, according to the F.B.I. The bureau contends that Mr. Chan told Olympus’s auditors in 2009 that the fund held hundreds of millions of dollars on behalf of Olympus, in the form of conservative investments like Japanese government bonds. The complaint says, however, that the money had been passed on to an entity controlled by Olympus to pay off a loan.

In the complaint, the F.B.I. said that Mr. Chan “acknowledged that it was wrong to assist Olympus in deceiving its auditor.”


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